tv Squawk on the Street CNBC October 29, 2013 9:00am-12:01pm EDT
growth, valuation structural reform. it's the real deal. >> david, it's been a pleasure having you here. thank you for our gourd. >> this is my gourd, al gourd, is going straight in my lock box above my desk. thank you for joining us. andrew will be back tomorrow. make sure you join us, squawk on the streets next. good tuesday morning, welcome to "squawk on the street." i'm carl quintanilla with david faber and jim cramer at the new york stock exchange this morning. the price gains continue, albeit more slowly.
futures meantime okay. 10-year yields not moving a whole lot and may not until we get the fed statement tomorrow. our road map begins with apple, profit and revenue did beat the street last night but margins are below expectations. >> sears has considered breaking off its lands end and sears auto businesses. facebook looking for the social marketing revolution. >> and nbc reporting the obama administration knew millions would not be able to keep their health insurance under the new affordable care act. >> first up, though, apple did beat the street last night with its fiscal fourth quarter numbers. profits fell, growth margins slid among heightened competition, despite the sale of 40 million iphones for the quarter. they see revenues 55 billion to $55 billion. here's what ceo tim cook had to say last night on apple's conference call.
>> if terms of supply, into the quarter with a very significant backlog. however, our supply is building each week. in terms of the retina or the ipad mini where the resin display, we'll start shipping later in november. it's unclear whether we will have enough for the quarter or not. i think we'll do fairly well with ipad, as i had mentioned before. we felt like it going to be a really great holiday season. >> you know we're in a brave new world when a revenue forecast for a quarter -- actually, a margin forecast for a quarter, jim and david, is fodder for new york tabloids. there it is, the actual projection for gross margins in the holiday quarter. >> the stock was down 12 to 14 points in the after market because people didn't get to the
key question. almost say two-thirds of the way through the q & a, what would have been the real gross margin had they not used deferred revenue. it changes the real numbers. the actual gross margin was good, 38.5. people don't understand you got to back out the product. i think the headlines are basically wrong. the subscription can't exist. i was demanding to know why can't we book the whole thing all at once? it's not generally accepted accounting principles. gross margin is good and people didn't seem to realize. that was that u-turn. 5 of 6 and 5:55 on the call, you saw that stock go from down to
up and that was breathtaking. >> interesting. ipads were a little bit light, right? 400,000? >> i thought that the phones were good. it's so funny, they really -- last quarter i was critical of the conference call. i know that some people took that seriously. i didn't mean to. i was just reading the call because i liked the theater of calls. this time -- it was all about china last time. it just shows you how difficult the analysts are. you're only as good as your last statement. china was fantastic. and china looks like it's going to be even better. and it's like, hey, guys, china's good. last time it was about how they had no china exposure. next time you'll have the burberry woman on the call and it is going to be an apple christmas, the stock is a serious buy and it is going to 600. >> really? >> you think so? >> yeah. >> they were positive on the call in terms of the product road map, in terms of where margins are going to stay in the current quarter. this will be the largest revenue
quarter. >> 55 to 58. i think could you do 60. is does annoy me by the way. people are supposed to being o looking at the gross margins, which tells you if people like the products. if this were tesla, hey, consumer reports, hey, apple would be at 700. but, no, it's a tortured -- the analysts -- >> tesla doesn't have a samsung trying to do exactly what they're doing, right? >> bmw might but i agree with that. tesla's a lot of fun. but i think there is a lot more satisfaction with apple than the analysts. the analysts were blindsided by samsung coming from nowhere. it was blindsided, left tackle, richard sherman came right through, didn't show that last night. so i'm looking that the quarter and i'm saying, wait a second. these -- we're missing the point here. samsung right now is awol.
this was a really good quarter. i know i've been critical of apple when they didn't deliver. this was a total deliver. i'm putting this as a lester performance, if you want to use the baseball analysis, this was good. pitch 7 3/4 innings, pretty good. >> carl icahn has done that, he's not hearing anything perhaps. >> he got to hear that they enjoyed -- didn't you get that? they said -- tim cook said that he greatly appreciates their suggestions. >> the input of shareholders. >> and he didn't mention the dinner. where was the dinner? >> i think it was at carl's house. >> it should -- eric lapierre could have made it so -- >> i'll eat breakfast, lunch or dinner -- >> if you're coming from out of
town, may i suggest danielle or -- >> jim's recommendation. >> yeah, use my name. >> we'll continue to talk to our shareholders. don't expect to hear anything from us until early next year. maybe it doesn't mean april, maybe earlier than april, maybe it's april. they bought back, what, 5 million shares on the open market, right? >> spent a lot of money. $4 million. >> 36 billion, how many companies are bigger than 36 billion? they bought back most of the midcap, change. we know in the end they've got the product line up for christmas. they say they can make it. worldwide people still like it. the stores are doing very, very well. i did not see a lot to dislike on the call. once they explained away the deferred revenue issue, eyes glaze over when you hear
deferred revenue. you have to give away stuff and can't capture the gross margin from it. when explained on the call, mid way through, made sense to me. got a reverse. >> something that may not make sense to you is sear holding. >> what a segue. >> it's announcing it's considering a consolidation of its lands end and sears auto center businesses. this is part of the company's turn around plan. they reported comp sales for the week ending october 26th. this was not an earnings report, it was an update on actions to transform the business and give us a sense of third quarter performance. by the way, adjusted ebidta is also expected to be in an approximate range of negative 250 million to 300 million versus the prior year's quarters adjusted ebidta, negative 156 million dollars.
>> yeah. you know, sears, they give you this press release, there's not a lot that accompanies it. they believe separating the management of lands end and auto businesses from sears will allow them to pursue their own strategic opportunities but they don't give us a great deal of detail with what they're thinking. with lands end, they say we won't do it as a sale but a spin perhaps. and sears auto centers, they tell us they're thinking about all sorts of different ways to potentially reposition the business and separate it, including a sale. >> the one thing that eddie lampert knows auto zone. and lands end i think it was a great brand. >> i remember when they did the deal, many wondered why they were buying lands end. >> and j. crew is no longer public, l.l. bean is not public.
>> how much of sears is being hurt by amazon prime, by the warehouses, the ability to deliver? >> you know, i have to embrace the day. pioneer is a very good web site. i want to read that new book about bezos. >> it was reviewed in the times today. >> and i think that you're going up -- you know, you're painting by number and you're going up against like da vinci. da vinci is putting up the big numbers. >> the comp at minus 37 is worse than the second quarter, they spun off stakes in canada, spun out stakes in hometown and outlets. there's a blog post this morning titled "five disturbing signs that sears is getting closer to death." >> really? >> death spot had an unbelievable quarter. i call it the death spot because -- >> kmart down 2.6 with those
comp store -- >> i shop everywhere, i did not shop at those places. i did buy a grill at sears. terrific. >> it always comes back to where i haven't shopped. i go right to the stores. >> do you. and you are a source for almost all things. on sears, remember, not a great float there. most of it is held by lampert, and the stock has been moving up. we'll see how it performs today. but it is -- >> i mean, could someone buy it? could someone buy sears? >> why? >> well, i know they -- >> well, real estate -- >> jcpenney is going to be selling real estate. >> that's what made me think about it. this is not the home depot, where they pantsed home depot. the operating business is not so
hot. this is the time of a genuine renaissance of these home companies. i had ppg on the other day, sherwin-williams. you got kitchen, you got bath, you got paint. i mean, everybody's all-systems go but they're not all systems go at sears. >> no. >> they're not all -- no, they're not. >> here's like radio shack. kind of the shack. shack attack. >> that's sort of a different story. >> i see something like that. >> interesting study out this morning. market research group forester has published an eye opening report on facebook based on a survey of nearly 400 marketing executives and concludes that facebook creates less business value than any other digital marketing opportunity. facebook averaged the lowest score on a scale of 1 to 5 among other social media outlets. forester is telling people not to dedicate a page outlook --
>> it's my charitable trust. i don't know. i speak to a lot of ceos who advertise on facebook. i speak to them off the record, on the record. they all love it. they all love the exposure. they have 400 ceos in this that say it's no good. the amount of money that's being devoted as part of the mosaic of online spent is rather remarkable. so i found this -- i mean, this is a billion people, you can reach young people. i don't know who they're speaking to but the ceos i speak to just swear by the product. >> it does take you back to the early days after the ipos where, for instance, gm had their doubts. >> and they come back. >> you take a guy like pat doyle, he took over when the stock was 10, it's in the 60s. he says the facebook app for dominos really just accelerated the roll-out because if you use
dominos -- i don't know if you use dominos, you don't have to speak to anybody, which is really sensational. hey, if you screw up, the order's on you. if you order no cheese, it does come back and say are you sure you want know cheese? no person would ever ask that. i think the app has been terrific and pat doyle thinks it's terrific. these are youthful companies trying to reach youthful people. twitter is starting to hear about a little higher valuation. >> certainly compared to facebook. >> the traditional price on twitter was somewhat modest. perhaps a smart way to go about it. we'll see where they end up. >> i think it's going to be $20 billion to $25 billion and people are going to go crazy. >> that's one of your big worries over the next couple of weeks. >> i know the new york stock exchange is trying to make the
deal function. >> despite what the white house is saying, nbc news reports the administration knew that millions of americans would not be able to keep their current health care plans under obama care. we'll get the latest on that after the break. also ahead, eugene fama was awarded the nobel peace prize in economics. and storm sandy, the second costliest storm in history. more "squawk on the street" in a minute. after your company's gone public? and the capital's been invested? or when your company's bought another? is it over after you've given back? you never stop achieving. that's why, at barclays, our ambition is to always realize yours.
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if you like your current plan, you will be able to keep it. let me repeat that. if you like your plan, you'll be able to keep it. >> that's the message from the president. you heard it many times as he made his case for health care reform. in the meantime, one stock to watch is going to be coors, being added to the s&p as of this friday. doesn't stop wells fargo to cutting it to market perform today saying they like the story long term but concerns on valuation? >> it is probably not tesla valva valuate valuated. tesla, solar city, those are anointed. but wells is being very disciplined. they look the stock, had a price target.
once somebody doesn't bumps price target -- we had a lot of apple target. i hate that. you got a price target, you get there, you nailed it, well done. >> amazing. feels like it's getting added to the s&p relatively quickly after coming to market. >> he did sell a lot of stocks. maybe it's floaty enough. >> in the meantime, that health care story we mentioned, lisa myers broke the story last night and has more. lisa, good morning to you. >> reporter: good morning, carl. >> tell us about the reporting you did and what the administration told us for many months. >> reporter: when we began hearing about all these cancellation letters or letters saying your health plan doesn't meet aca standards and therefore we're going to have to terminate it, we decided to get a feel for how many that was going to be happening. we are looking strictly at the 14 million people in the individual health insurance market. what we found was we dug back to old aca regulations from
december of 2010 and found that by their own estimates, 40% to 67% of the folks in that market would not be able to meet the standard to be grandfathered, which means they could not keep the policy they had. so what the bottom line is here is that the administration knew at least three years ago that many, if not most of the people in the individual market would not qualify to keep the policies they have if they want to, which of course is one of the president's fundamental promises. >> and of course now we have potentially, lisa, some litigation led by ron johnson of wisconsin to potentially grandfather some folks and be able to keep some of those substandard plans. does that seem like something the administration would be behind? >> i don't think so. when you look at the regulations, beyond the fact that they thought the churn of the market would keep most folks from being grandfathered, they
also wrote the grandfathering rules in such a way that even if you have the same policy you had as of march 23rd, 2010, if you had a significant change in your deductible, your co-pay, benefits, anything like that, then you lose the right to be grandfathered. and because in this market those kind of things tend to change a lot. so they basically wrote the grandfathering rules in what experts tell me was like the narrowest possible way. >> lisa, congratulations on just a fabulous story. great to see you on our network. >> reporter: thanks. >> i'm hearing a lot of people are willing to say we'll take the penalty, pay the $2,000 and get rid of the health care because it's so much cheaper to do that. are you hearing anybody putting that through? >> reporter: i hear frustration of people saying like that but when it gets down to it, that's awfully risky. you're risking personal
bankruptcy if you get sick and have no insurance at all. i've heard of youngers people doing that but i've heard people in their late 50s who were shocked by the size of premiums when they were offered and didn't want to pay for maternity care and what not when they weren't going to have any more children. >> lisa, thanks again for your reporting on that. lisa myers joining us from washington. >> she is good. >> bringing home the profits, that's what cramer is all about. we'll hear what he has to say next in his "mad dash." futures look okay here on a tuesday morning. we'll get to it with the opening bell in just about seven minutes. it's as simple as this.
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♪ roller coaster of love, roller coaster ♪ five minutes to opening bell. time for "mad dash" on this tuesday. >> one of my favorite companies, david, the press release was so negative. i wanted to call the guys and say let me talk you off the ledge. it ain't that bad. truck sales they're saying are really terrible. you see it down 10. a lot of analysts going to downgrade it. i think it's troughing. >> any reflection on the industrial economy? >> you know kleinfeld. alcoa is up $1 since that call.
1.25. told you that trucks were a little bit hurting. eaton, sandy cutler said trucks are troughing. you knee what this makes me feel? makes me feel a little better about caterpillar. a lot of people where the gang couldn't shoot straight, i myself was kit call about it. cummings is a great company. it has a lot to do with mining trucks. mining trucks. but i'm not walking away from cummins, even if they tell me to! it's too great an american company. >> and get a chance to buy it cleaner today. >> all right. we're going to keep an eye on stocks, including what's coming up at the opening bell. ♪
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then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. you're watching cnbc "squawk on the street," live from the financial capital of the word. the opening bell in just about 45 seconds or so. we'll have to keep our eye on apple, guys, as it is poised to gap up or down less than 2%, only five times in ten years has it moved this little after an
earnings report. >> that's extraordinary. >> normally the day after earnings, it's a big story one way or another. >> it should be a 3% or 4%. it's too good a quarter. again because of the way accounting is people are mystified. and the headlines are other, if the stock goes up. don't be counterintuitive. this was a good quarter, a good one. >> there's the opening bell and the s&p at the top of your screen, at the big board. china life insurance celebrating ten years on the nyse. and over at the nasdaq, a finnish business association, speaking of some of the companies based over there. nokia had a pretty decent quarter, unexpected profits, saying good things about telecom equipment. >> nokia got rid of what was hurting. what a remarkable turn. the analysts hated it at the bottom, though there's probably somebody who didn't. i see pfizer up.
pfizer is selling stocks down in the premarket and then upon further review, the clover field does not stand. they reverse. they beat by a couple pennies. and they say in the coming years a lot more studies about their pipeline. >> i like pfizer much better than merck. it's johnson & johnson. david said some very good things. alan goreski, i have certain ceos on my radar screen i like and he is one of them. >> you mentioned cummins. that's the primary lagger on the s&p this morning. >> what a bummer. >> and goodyear not far behind there. >> it's a sad day for these because of trucks but i got to tell you, they're going to come back.
tomorrow after books cuts numbers from cummins, you buy them. >> meantime, we mentioned before the bell, masco. >> they didn't talk that much about europe. but europe is clearly better for them. they do have some nice exposh why are for europe. i happen to think the home depots of the world are doing quite well. sears not doing as well. >> although the shares for their part are up a bit, 41 cents gain. >> maybe people want a piece of that auto. >> lands end, maybe there's something there. >> you spin appliances, you spin kenmore. >> how do you reverse years worth of a comparable first year's decline and you have a negative ebidta number now of -- >> 250 to 300 million. >> what would you do?
what would you do? merger with jcpenney? >> wow. a merger of lesser evils. >> jcpenney, which yesterday again for the third time in five weeks affirmed that sales trends are improving, looking for positive comps in the near future. >> i would like hourly numbers. how was lunch? i'd like a little more granularity. how was tonight's number? did they stop? it's really dark. maybe people got to coast. there's like five or six customers making a difference at lunchtime. i think jcpenney, if we all go there right after the show -- you work till 12. we'll catch lunch. we'll go to a good place -- >> how about danielle's.
>> and then i'll go to j this. penny and buy some shirts and see the numbers tomorrow. >> a couple of calls on pot belly today. piper overweight, tries target 34. they call it a compelling growth story. they say there are few opportunities for growth in restaurants right now. >> here is the key word i think is the real underlying problem with pot belly, overweight. i know you were using it in the context of research but pot belly doesn't fit in in the overall theme of what people eat. my panera salad i had last night, the thai chicken salad, 430 calories, pot belly, how much is half a sandwich there? >> i wouldn't know. >> let's say it's more than panarea, and it's certainly more than the new sofrita sandwich
from chipotle, which is made with air. >> we always talk about chipotle. >> you want to talk about line equity? >> back at chipotle. >> appleby's. that stock is up gigantically. >> i'm going to take us to the airlines briefly. because we did get a development on usair and american, potential plans at least to merge. there is a mediator that has now been appointed by the judge to at least try to see if there's some grounds for a settlement between the department of justice, which of course is suing to block the merger and the two parties involved in the merger to see if there's something they can get to. don't often see that in these kinds of situations. believe one time was microsoft from the d.o.j. you don't often see mediators in anti-trust litigation. the trial a month away at this point. and we'll see if this does
anything. but it has certainly got to be viewed in the absence of anything else as a positive, at least leading to some sort of sense that -- >> i thought it should have been up a buck and a half. i thought this was dead as a door nail. >> everybody's got different views. you can talk a lot of different anti-trust lawyers. often times you'll see uniformity of opinions on these kinds of litigations. not in this case. not in this case. you'll get people saying, no, i don't think they've got a good case. others say, no, they're going to win. >> the group has been strong. more reason to own the airlines. delta is my favorite. >> meantime, one final note here before we get to bob on the s&p, as of this moment at 1768, the s&p now has its biggest monthly gain in two years. >> oh, come on! >> since 2011. >> i thought october was a scary
month z month. >> i thought so, too. >> now, november is going to be -- every single one of these has failed, right? every single one of these maxims have failed. >> the only one is -- that works is don't fight the fed. >> i like that, don't fight the tape. those are pithy maxims that work. >> and shrink to grow. >> shrink to grow. >> we should do a segment where all we do is talk in old market -- >> 100% cliche, right? >> we could easily do that and go on for hours. >> let's get to bob pisani and see what he's watching. >> in the heart of earnings as soon as and some of my favorite companies, big multi-national industrial companies, the kind of boring companies that make the heating, ventilation and air conditioning systems, a lot of them are reporting good results but a lot of revenue misses today. look at johnson controls. they make heating ventilation air conditions and car
interiors, a great report, a six-year high. they expect the earnings to go 30% in the first quarter of 2014. 2014 commentary was outstanding overall. that's a great report. regal beloit, they make machines all across the world. beat on the top line, light on revenues overall. growth in power generation. modest growth in china. not a bad report. looks pretty good. look at masco, plumbing, faucets and cabinets, better than expected top and bottom line growth. we're talking sales of faucets here. there was a little concern about the cabinet divisions, pricing was very hard here, revenue up 12%. air products, they make industrial gasses. watch them for global industrial demand overall.
fair report here. they talk about guidance, 4% to 7% growth overall. i think that was a little bit disappointing to the street that stock is trading to the down side. goodyear, fair, their outlook for the full year is unchanged for north america and europe. i think that was a little disappointment. people are expecting the economy to improve, a little better guidance overall so that stock is on the down side. we talk about cummins a lot. the truck business is really ugly. looks like the weakness was largely in mining and europe and light duty pickup trucks. but paccar, they say their customers benefited from higher fleet utilization, although paccar is down in sympathy with cummins right now. i want to close on it different topic, tableau software. i interviewed the ceo, he was bright eyed and positive, they priced at 31, opened at 47, this
was in may, the stock is trading at near 70 now. insiders own the stocks at 43 cents. 43 cents. it's a big data story overall. finally, i want to point out michael kors trading up almost 2%, going into the s&p 500 on friday, replacing the new york stock exchange. that deal with ice supposed -- supposed to happen next week. will that be an historic deal. >> you'll hear a lot about the initial public offering of twitter. there's another ipo out there that i've argued has -- is going to blow the tops off the twitter and that's ali baba. when that is coming to market, seems to be unclear.
i hear filing likely still in the first quarter of next year. company has yet to choose its underwriter or choose its venue. as much as it may want to list on hong kong, it's more likely it's going to list here in the states, that being alibaba. why is it going to knock the socks off twitter? get a load of bernstein today, which comes out with a report saying it believes alibaba will be worth $190 billion. the number is staggering. but when you look through the numbers and consider the growth rate that alibaba haase in its two key businesses, it perhaps doesn't become quite as absurd as it might seem at the outset. they basically value the two key businesses at $180 billion, throw in some of the other things they've got there, you get a total value of about $190 billion. yeah, i know, it sounds crazy but then you go through some the numbers and you look at this is a company growing at ebidta at
over 50% a year. people expect it will have as much as $7 billion in 2014. again, incremental margins have skyrocketed over the last few quarters and we get a sense it have from yahoo! which does give us some of the financials from alibaba. and so bernstein says, hey, i'm going to go with about 32 estimated $6 billion net income in 2016, that's how i'm going to get to that number. that's not going to be the value at which it ipos perhaps. nonetheless they say they could be valued at 120 billion. every month that goes by, alibaba keeps going up. a couple of months ago the company was pushing back and saying, no, maybe 80. push back on that and you're getting $190 billion numbers. all of that will also be important for yahoo! which owns
24% of alibaba and the value accorded to that. bernstein comes out, raises price target and says it's worth $40 a share. there's the alibaba ownership. that's after tax affecting it i think. and you get to $40 -- $6 a share for the core business. we shall see. but i will tell you this, alibaba growing as quickly as it is will be fascinating to see when it does come public. that will be a first half ipo. again, the filing still expected in the first quarter. you actually get the offering then, unclear, but let's assume it's the first half of the year. another key that yahoo! shareholders need to be up on, can they figure a tax efficient way for what it doesn't sell, may sell as little as 9% and
therefore have a good remainder of alibaba, which is shocking, $190 billion. >> it's killing it. >> killing it. ebidta growing. it puts twitter to shame. >> as for the bernstein call, what if the core value does improve? >> here's the issue for me. wrooef se we've seen these over and over again, internet companies and people go crazy. i don't know what to pay for alibaba. i don't. if it's real, and it sounds real -- >> it's real. this company is generating enormous operating profit. >> the company should be valued even more than that is where i'm coming from. you got 50% growth, it should be valued much more than that. >> it's going to immediately be the largest -- it's going to be bigger there and amazon.
amazon and ebay together -- >> who is cheaper if that's the case? i like the yahoo! run, i like what myers is doing but this is another reason to own yahoo!. >> let's head over to rick santelli in chicago at the cme group. >> always interesting ideas of where the flows are coming from. that's the euro dollar options pit, not the currency, short-term rate. they are not expecting a lot of volatility, which used to be a real normal occurrence for fed meeting days, even two days in the past. but it seems like the market's pretty much or all expecting about the same and that is no change significantly on the fed. but here's what i want to talk about today. as i talk, let's go through 5s, 10s, 30s, bunds, gilts. i want you to see the denynamic.
if you stripped out autos, it wasn't a bad number. it's like stripping out components of durable goods. many of the bond traders and gurus are right, that curve steepening is embedded when you have the fed liquifies on the short end and the long end trying to outprice its little subsidy on the fed. at 8:30 eastern the retail sales data wasn't bad. even the european markets. the long end rates mean curve steepen. if you dig into the nonseasonally adjusted aspects of retail sales, they're not nearly as good, not all that good at you a, which is why there's a limiting factor going on. >> if you look at a chart going back november 2011, you can see that's where the euro is pricing against the dollar. the dollar index, euro centric
as it is, you can see it's just a couple of nibs in the path before we all get on the same page. if you're looking for reality in the currency market, i don't think you're going to get one with the interaction of the euro, the dollar and the yen. carl, back to you. >> when we return, who says goldman sachs is heartless? up next, find out what it's doing to make its junior employee's weekends a little more bearable. and it's been full speed ahead for norwegian cruise line ever since the ipo in january. when we come back, ceo kevin sheehan on the ipo business. gasoline in this country a new low for the year. we'll talk about that and the shaky global economy with him when "squawk on the street" comes back.
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to improve the work hours for more of its junior employees, making sure weekend work is only used for critical client activity. the firm has been reportedly losing young workers to hedge words and technology startups with better hours. lloyd blankfein will be on "closing bell" today at 4:00 p.m. eastern. is that what it was like when you were there? >> i used to teach class friday night from 4 p.m. to 7 and then working to 11. what is happening? i used to love keeping them in locked rooms, posting the people who finished last, posting their names on the door. where's the goldman i loved? >> you walked in the snow both ways, right? >> that was levy, right? >> i'm embarrassed by this. i mean, it was about being better, working harder.
i mean, you know -- winning is everything. >> they're still working quite hard but they have to compete with private equity or hedge funds where the remuneration can be quite impressive and the hours are perhaps not as stressful. >> probably send you to the puerto rico vacation on weekends. this is embarrassing. embarrassing. >> the dow, by the way, is just about 50 or 60 points away from a record closing high. we'll keep track of that. here's what's coming up next on "squawk on the street." coming up, do you think you have what it takes to train the dogs of the dow? well, that may be harder than it looks. but with jim cramer and his six stocks in 60 seconds, it may not be so "ruff." "squawk on the street" will be right back. [ male announcer ] at optionsxpress, our clients really appreciate our powerful,
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impressive. >> pretty up for colgate. >> colgate delivered a good quarter. they're on fire. >> we covered herbalife. >> here's the deal, america is strong, china is strong. that's the takeaway. >> and teva, this has been a disappointment. take profits. >> and still no conference call. >> what's coming up on "mad" tonight? >> it's my halloween show. i'm looking at the stocks that came back from the dead in the last few years and they are scary good! there's some scary good stocks on that list. >> does this mean you're dressing up this week? >> i should dress up, shouldn't i? i'll pull that bull uniform i've got or maybe a bear uniform to shock people. i'm still occasionally stopped
on the street. you are the latest lennon. if you're unhappy, it your own fault. >> coming up, the speaker of the house and house gop leaders set to talk in a few moments. also a capitol hill hearing on the president's health reform law. we'll stay on top of all of that when "squawk on the street" comes back. ♪ [ male announcer ] staying warm and dry has never been our priority. our priority is, was and always will be serving you, the american people. so we improved priority mail flat rate to give you a more reliable way to ship. now with tracking up to eleven scans, specified delivery dates, and free insurance up to $50 all for the same low rate. [ woman ] we are the united states postal service.
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welcome back to "squawk on the street." we're going to have an august business inventory and october consumer confidence from the conference out momentarily. and the survey says august business inventories increased at a rate of 0.3%, which is exactly as expected. maybe more appropriate, october read on consumer confidence is 71.2. that's a far cry from the 75 expected and consider that in june we were at the best level at 82.1 since january of '08, we're ten points off of that or a bit more. many will continue to look at
confidence as a leading indicator. for the most part it isn't but it gives as you snapshot in time as to what was relevant to some investors' mind. >> we'll watch the market's reaction to both of those numbers. breaking news coming out of washington. the house ways and means committee is holding a hearing on the status of the implementation of obama care. centers for medicare and medicaid services administration will be testifying. she's first up once the chair and ranking members finish their opening statements. we'll bring that live when it happens. and john boehner and his leadership team will have a news conference following their caucus meeting. we'll get you any headlines from that. >> let's get more from the house ways and means committee meeting. bertha coombs is monitori monitoring that.
we're ramping up to khathleen sebelius's remarks tomorrow. >> tavenner admits it has not lived up to the expectations of american and blames a subset of contracts that have not met expectations. contractors blamed cms for not integrating the system and making changes. she does defend the act and says the weighted average premium is 16% below the premium implied by the congressional budget office initially when they talked about premiums on the plan. she doesn't aggress the concerns that are raising now about premiums going up in the individual market for those -- particularly those that do not qualify for subsidies. she says, in fact, in her conclusions they have delivered on their product quality, affordable insurance.
a lot of the questions today will be what did you know, when did you know it with regard to the flaws on healthcare.gov but no doubt there will be questions as well with regard to premium prices and how they're impacting individuals in the individual market. guys, back to you. >> all right, bertha. we know you'll be on top of it. thank you for that. our bertha coombs in washington. >> the s&p hitting another all-time high. is it finally time to expect some kind of significant correction? our next guests have differing views on that matter. our bear and our bull. guy, good morning to both of you. >> good morning. >> kyle, s&p is having its best month in two years since october of 2011 and there's a growing sense among some that because it has been such a torrid month, we'll pay for it in a more torrid way on the way down. do you agree? >> this is what i say. we have moved to being cautious
live optimisting on the marketplace. i'm highlight reasons why. one, the fact that interest rates are going to be kept low, janet yellen coming in, i think she's a dove. there is no other place to look for yield or outsized returns but the united states marketplace. we're going to pick sectors like technology and buy yibiotechnol that we think will be innovators going forward in the united states and continue to be in an effort to find yield. >> what's interesting about that, kyle, is fundamentally are you actually that positive on the u.s. economy or are you just saying it's the best house on a bad block? hold that thought actually. we want to go straight to john boehner speaking in washington. >> who are seeing their premiums rise, they're seeing their policies being cancelled. many, givagain, are losing thei plans. i was at a small business in my
district last friday. they've got 46 employees. they provide health care to their employees. scared to death, though, to hire anyone else because if they do, their whole plan is going to be subject to more government approval. they don't want to do it. that's why i said last week that obama care is like a wet blanket over our economy. american people are looking for more jobs, better wages, but with all the uncertainty around this law, employers are having a very difficult time making decisions. it's time to do something before it gets any worse. >> good morning. the house we'll hear from senior -- >> you just heard speaker john boehner there calling obama care a wet blanket on the economy. >> the meantime we want to pick up on fundamentals. michael guyet is here, he's much more cautious.
michael, why is it not necessarily even that you think the fundamentals are so bad but that means that stock performance will turn lower from here as well? >> stepping back for a second, the argument that yellen is a dove is bullish, it's not translating translation expectations, then the fed risks another bubble and a big embarrassment for the federal reserve. i think everyone says what's a catalyst for a correction, if we're going to keep on having the stimulus? the catalyst may be the fed itself if the fed, rather than the supplies of no taper on bonds actually tries to taper enthusiasm in the soft market by tomorrow morning that it is concerned about speculative risks. we're seeing money going to markets but not the economy. >> but that's from left field for them to do that. what they will probably not be able to help themselves doing is talking about the possibility of a taper at some point and being based on the facts.
yellen has to go through confirmation hearings where she may not want to appear too dovish and probably more doves will come off than will go on. i think that is more front and center, rather than an explicit greenspan-like warning of irrational exuberance. >> i believe it was a low probability event but so was the idea they wouldn't taper. they want the wealth effect did you don't want it to affect on the wealthy. >> but isn't your diagnosis of the economy contradictory to that? you're so bearish, worried about inflation, why would the fed step up and say the things you're suggesting? >> inflation expectations have failed to confirm the rise in the stock market. everyone says qe is supposed to be bullish but that assumes qe works in the economy. we have for the first time ever a scenario where qe is not
filtering through to inflation expectations. that is unlike every round of qe the fed has done. it's getting to point where it's very expensive. the idea you cannot fall in the face of the fed put is wrong. >> kyle, your response? >> i'm nothing go sit here and argue whether or not this is a fed-driven market. i think for the most part it is. having said that, we're in the business of making people money and i'm saving that this is the best alternative the united states equity markets to make outside returns in sectors in the united states that are still very innovative and very entrepreneurial. the three richest men in the world, mario draghi, karuda in japan and ben bernanke are not
going to let this fail. >> is bern bernanke one of the wealthiest men in the world? >> what i meant is he's got his hand on the dollar basically. >> you're bullish and should take us into next year, right? >> i think that's right. >> kyle harrington and ben gayed sharing their views this morning. apple as gross profit margin was down from a year ago. we're joined by our guests now. good morning to you both. >> good morning. larry is the shareholder here. first of all, where did you guys get in on apple and how long do
you stay exposed to the stock? >> oh, i think we're going to be in there for a long time. probably around $300. it was about six or seven years ago when i -- the first apple stores in the gm building and i thought there was really something special going on here in terms of the way the company dealt with the consumer. >> do you feel that way still, lar larry? what is the story now as we head into 2014 and beyond? >> i feel the stock moves into a better neighborhood. if you look at apple as a consumer product company and compare it against things like mcdonald's and coca-cola, it's really a superior situation selling at a discount, makes 33% on unleveraged equity, makes
over a 60% return on non-cash assets. these are extraordinary profitability ratios. that's why carl icahn wants them to buy a lot of stock. every share of stock they buy, they make a 16% return. when you combine this with the fact that apple is a trusted brand and is planning these die vices that i think over the next five years, particularly in the smartphones, are going to be able to collect way, way more tolls than they're collecting right now -- >> collect more tolls meaning -- >> meaning they're going to be using location-based technology. so that they can zap advertising to you while you're in a store, can you transact. mobility is going to be a huge trend and this company and google are at the forefront of mobility and you can get it at six times cash flow. >> you've got a $575 price target, shares are around 525,
526 this morning. in your view, what are the c catalysts they that an get us from here to there? >> apple has become a more product story at this point. >> allow me to interrept you just for a moment. marilyn tavenner is about to testify here before the house ways and means committee. >> we know that consumers are having difficulty enrolling via the marketplace web site. it is important to note that the affordable care act, however, is more than just a web site. it creates a new market, which allows people to access quality affordable health care. it allows them to have insurance options. it creates a pooling of consumers into statewide group plans that can spread the risk between sick people and healthy people, between young and old and then bargains on their
behalf to get them the best deal on health insurance. by creating competition where there wasn't competition before, insurers are eager for new business and have created new health care plans with new choices. the premiums are lower than expected and millions of americans will qualify for tax credits to make the coverage more affordable. we know consumers are eager to purchase this coverage. to the millions of americans who have attempted to use the web site to enroll in health insurance, i want to apologize and ensure that you healthcare.gov can and will be fixed. we are seeing improvements each week and by the end of november the experience on the site will be smooth for the vast majority of users. over the past month, millions
have visited healthcare.gov to take a look at new health care coverage under the affordable care act. and in that time nearly 700,000 applications for coverage have been submitted across the nation. more than half of those are in the federal marketplace alone. this interest shows people are looking for quality affordable health care coverage. we know the consumer experience has been frustrating for many americans. some have had trouble creating accounts and logging into the site while others have received confusing error messages or had to wait for slow response times. this initial experience has not lived up to our expectations or the expectations of the american people and it is not acceptable. we are committed to improving the performance and have already made progress. in the first few days when the site went live, few customers could create an account. now over 90% can. we've updated the site several times, fixing bugs and we've
added more capacity in order to meet demand. we're pleased with the quick improvements and part of the systems are already working well, the data hub, routing tool that provides an efficient and secure way to verify information submitted by consumers, is sending information to the marketplace in less than 1.2 seconds. social security has reported more than 2 million transactions with the hub. even with the success, there's still a significant amount of work to do. we've spent the last few weeks -- last week going over that and while these problems will require a lot of hard work, the bottom line conclusion is this healthcare.gov site is fixable. we've identified a clear path for a lot of fixes that will be undertaken one by one. to ensure the work is done as quickly and efficiently as possible, we've enlisted the
help of qssi to serve as general contractor for the project. they are familiar with the complexity of the system and the work they provided for health care.governor, the federal data hub, is working well and performing as it should. qssi has the skills and expertise to help us address these problems. they will work with leadership and contractors to prioritize needed fixes and make sure they get done. we're committed to improving the consumer experience with healthcare.gov. i encourage people to continue to apply by phone or mail or finding local help in their community. the fact is that the product of the affordable care act, a marketplace for quality, affordable health insurance will work. the product is not going away and the people are not going to continue to wait. we know the price is not changing. weep know americans have ti-- w have time to enroll in
affordable coverage. >> that is marilyn tavenner, testifying in front of the house ways and means on a day where this their is this to talk about and also lisa myers reporting that the americans would not be able to keep their coverage as they know it. let's go to john harwood. good morning, john. >> reporter: good morning, carl. >> no big surprises? >> no big surprises. marilyn has a considerable amount of public sport. eric cantor has spoken favorably of her from her work in virginia running the health and human services department. but she's in the middle of a very, very large storm, kathleen sebelius is going to experience that storm tomorrow and part of it has to do with the poor communication the administration has done on exactly what the implications of the way that this health care law is changing the individual health insurance
marketplace would be. the whole point of the law was to change the individual market, which was something which wasn't available to a lot of people and provided bare bones plans but because of the minimum standards in the obama care law, many of those plans are now being cancelled and people were not prepared for that. a lot of people heard the president say if you have your haeg health insurance you can keep it as something that was universally applied. that's not how the president meant it but they did a poor job of explaining that and now people are feeling deceived and that's a huge problem for the administration. >> according to what lisa myer is telling me, it would appear they did know. >> reporter: yes, the administration did know. the question is whether the public knows, whether the public was prepared and the public was not prepared for this. >> very powerful. john, for the moment, thank you very much. coming up on the program, congressman paul ryan is getting
ready to question marilyn tavenner. our own larry kudlow spoke with him last night, ryan saying we owe it to the american people to find an alternative. find out what he had to say about that, too, after the break. smabout insurance. because what you don't know, can hurt you. what if you didn't know that posting your travel plans online may attract burglars? [woman] off to hawaii! what if you didn't know that as the price of gold rises, so should the coverage on your jewelry? [prospector] ahh! what if you didn't know that kitty litter can help you out of a slippery situation? the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum - bum♪ with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options...
merri marilyn tavenner testifying today. our own larry kudlow spoke with paul ryan. >> ryan is going to be center stage. we spoke last night. it will be aired tonight on "the kudlow report" at 7:00. on the budget report and deficit, he said sequestration, budget cuts are the base line, there will be no tax increases. if there's a deal to be made to loosen up the sequester, there have to be other budget cuts substituted for that, perhaps some entitlements but nothing else. taxes are off the board no matter what you may hear. i think we have -- >> i would like to think we can come up with better, smarter ways of cutting spending that also are good for the economy. it would show the credit and
bond markets and the world that america is getting ahead of its problems. we want to have an agreement to foster these things, common ground on spending cuts, entitlement reforms and focus on pro-growth policy. >> i mean, he loves to have some pro-growth tax reform in there, simon, but in my discussion with him on stage and off stage, he felt the odds of that are very, very low. the debates will be what kind of spends cuts, whether the sequester line will be used or whether they'll loosen up the sequester and have additional cuts, maybe tiny entitlements but i don't think he was optimist being aboic about that. >> it might be good news if we can get some sort of deal, larry, but a deal that is less ambitious than both sides would like. we can at least get continuity
and get to obama care. >> i don't know. i think the most important this evening here, and it's worked for two years, is the budget caps and the sequester spending cuts. it has limited the size and scope of government and it's allowed the private sector to have some room to breathe. and i think it's terribly important that those sequestered budget cuts remain in place, one way or another. i think that's the key. but i can tell you this, ryan and the republicans are not going to open the door to any more spending or any more tax cuts. he made that perfectly clear several times in my interview last evening, which will be shown tonight on our show. >> do you not worry -- i'm just trying to remember what the size of the automatic spending cuts, the sequester for next year are. it's $109 billion, isn't it, larry? don't you think that will hurt -- longer term we need to get taxes down arguably, but in this very precarious situation, that's going to hurt the
economy, isn't it? >> no, i don't think so. i don't believe in that keynesian model. remember, these are cuts off of a rising baseline, which in effect flattens the baseline and may reduce it somewhat. but, no, i think that's very helpful. to me, the less government you have, the more room you have for private sector operations and initiatives. over a period of ten years there's a trillion dollars worth of reduction, but that comes off a rising base line. so the rate of increase is flattened out. i think it's high time we did that. what you want optimally is to get spending back down to, i don't know, 19%, 20% of gdp and it has come down. it got as high as 26% of gdp several years ago, it's now running about 22.5% and i think it's heading towards 20%. i think that's good policy. i would just like to see, you know me, simon, i want
pro-growth tax reform, particularly business tax reform, particularly the repatriation of over $1 trillion lodged overseas. >> that could change the game if it ever happens, larry. it's great seeing you. we'll see you tonight. >> thank you, thank you. >> "the kudlow report" at 7:00 p.m. eastern time here on cnbc. dow is up 43. let's go to dominic chew. >> shares of cummins has stalled out. they reported profits that fell short of estimates and cut full-year profit and sales outlook because of weaker demand, especially from the miners. meanwhile international sales fell by 4% because of weaker demand in places like europe and india, carl. back over to you. >> that one is hurting a lot. when we come back, apple ceo tim cook promising some new product categories next year on the company's conference call. is that enough for investors? what cook needs to be doing to
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we're now an hour into trade. here are the stories we're squawking about. at 7:29 on the west coast, 10:29 on wall street. the confidence board announcing its consumer confidence index fell 9 points in october to a reading of 71.2. the group says the federal government shut down and the debt ceiling crisis took a large toll on consumer expectations. shares of pfizer are on the
rise. the dow component posting better-than-expected third quarter earnings helped by cost cuts and strong sales of newly approved cancer drugs. and goodyear tire missed overshadowing what is an earnings beat and a higher full-year guidance as they reshuffle top management. >> the s&p 500 just hit an intra day all-type high. there's been a sharp increase in quantitative expectations for next year. steve liesman is back in headquarters with the results of a cnbc fed survey. good morning, steve. >> reporter: you characterized it perfectly, a big change in qe expectations but not a big change in stocks. back in our september survey here, here's where we thought the fed was going to taper,
november 2013. april 2014 is when the market on average believes that the fed will taper. how about when it will finally stop quantitative easing? used to be august 2014. now it's moved all the way to december 2014. that means come along with me here, we're going to be doing quantitative easing all through 2014. what has not changed is the expectation for the first hike in the funds rate. it had been the second quarter of 2015 or the third quarter june 2015 now. that remains the same. let's take a look at what we call the taper discount. how much of the expectation for tapering is built into the market? it has been as high as 80% for treasuries. now it's down to around 60 or 55. how about equities? still a ways to go in terms of baking in what the expectation is for tapering, mortgages as wel well. what had been baked into the september taper is not baked in.
you can see 1753, they're predicting an end of the year specific as much 500 that is below the current level. how about for june 2014? 1816, just about a 2.89%, about a 3% increase from now. these guys have been down, they've been chasing this market higher. this group of experts, 40 of them, economists strategists, money manager have not believe in this rally and they don't think it continues. take a look, though. big change in the 10-year outlook. they had been looking for 3.4% and 3%. now that's come off. a big change in the outlook for the 10-year. 2.65 is the outlook for this year, right around where it is now. let's look at the next screen. what we're looking at here is the feds fund forecast. just 0.11 for the end of this year, 0.21 and .82 for 2015, down from 0.9.
so there is not a big expectation for fed hikes all the way through 2015. kevin gidis says just about the time you think the bond bull market is about to end the u.s. government goes into action, thank you, washington. and job roberts says there's too much bullishness and complacency currently in the equity markets, valuations are slightly extended in the current economic environment. go to cnbc.com and look at all the results and the stories we've written there. coming up, we'll have the economic outlook of this group and the outlook of how janet yellen will change the fed as we know it. >> for many of those people, they may not believe in the rally but they have to sit in it surely. >> many do not think it's going to work, do not think it's going to stay. i don't understand why they haven't increased their equity outlook with their expectations
for the federal reserve, though those things certainly have gone hand in glove. >> for the moment, steve, thank you very much. steve liesman at hq. puerto rico is in a debt crisis. but why should you care? well, you might well own the country's troubled debt even if you don't know it. 180 mutual funds and combined $100 billion in assets have exposure now to puerto rico. should you be worried? david faber thinks so. listen to him after the break. ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line,
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you have a population in decline. any puerto rican who has enough money to get out of the country does, the pensions are funded to the tune of 9%, they owe 32 billion to the pensions. there's corporate debt on top of that. you look at this and say i don't know how they can exist much longer. >> our guest has a much more optimistic view. why do you believe that's the case? >> my view is quite different. as a bond holder, we're essentially lenders. two of the main things we look at are the ability to pay and the borrower's willingness to pay. in is not a latin american sovereign, eight territory of
the united states of america. its constitution was ratified in 1952 and the commonwealth's constitution has a very important provision that provides for debt service having the first priority of all government expenditures. it's very strong. their history of paying back their debts is quite strong. just last week governor padilla on an investor call said we will do anything it takes to pay back our bonds. >> although, i mean, from a technical point of view, that's absolutely correct. from a practical one, there are those that say if you can't fund the government, if they should get to that point, we were dealing with it with the debt ceiling debate, if you're not going to be able to pay social security checks, you got a big problem. one would expect if puerto rico got to that, it would be the same problem, wouldn't it? >> this goes to the ability to pay. one of the things i take comfort in is the massive improvement that's taken from the fundamental standpoint over the
last several years. they've run a structural budget deficit for years. that budget deficit peaked four years ago. so it's actually improving. the budget deficit expected for this fiscal year is down to $800 billion, which is really just slightly more than 1% of their gnp. the bottom line is they have to fix their budget deficit. the market has given them a wake-up call, and they are doing those this eveninngs necessary. >> but in order to do that, they would have to generate economic growth. they've been in a rescission since 2006, to carl bass' point, there is a population decline. you can site statistics, paying a lot for electricity use, crime rate going up, population declines. what makes you think they'll be able to get it moving in the right direction? >> there's no doubt that the cost of energy is a problem on the island and the government is taking steps to move from oil generated electricity to gas and that will go a long way.
the island actually has so many things going for it, though. it has a very highly educated and bilingual workforce. about two-thirds of all citizens between 18 and 24 are enrolled in higher education. and importantly we would like to see on the revenue side of the equation more taxes and fees coming in so you'd like to see growth but we don't need it if you see things on the expenditure size. >> $37 billion underfunded for pension operations. >> correct. they've moved from a defined benefit plan to defined contribution. so their liabilities will no longer keep growing into the future. >> so it helps the near term sol vensy but does it deal with the overall problem? >> they'll have to fund their pension cost on a pay as you go basis.
much like our federal government does with social security. they're actually in a better place than many states and local governments. >> these bonds have traded off dramatically. you've suffered as a result. are you buying more given the discounts? >> we're a strong hold and adding around the margin. we already have significant positions in many of our funds but there are attractive opportunities to buy double, triple tax-free bonds depending where you live at yields around 8%. the taxable equivalent yield comes out to approximately 16% to those taxpayers in high-tax states. >> dan, we have to leave it there. the debate will continue. we hope to have you back in the future. back to you guys. >> let's get to dominic chu and get a market flash on nokia. >> they're surging up about 9% after the company reported profits that came in better than analyst estimates. and also looking at what's
happening with their smartphones sales, they're selling more of the nokia lumia cell phones. the high-end and low-end phones helping power nokia share to the up side about 8%, 9%. >> still ahead, norwegian cruise lines up and reporting a rise in profit now in the third quarter. the ceo will join us live with his first reaction to the company's results a little later. we'll be right back. ade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates.
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welcome back and let's get straight over to the cme group. rick santelli with the santelli exchange. good morning, rick. >> good morning, kelly. it's very disturbing to me to hear some of the revelations as to how far back in time many of the promises made to push health care over the goal line, it's just -- it's deception. you know, there was a great movie -- not great but i enjoyed it, "miss congeniality." the reason i bring it up is when you ask a miss america contestant a question, the answer is something everybody wants to hear. so what are you going to do if you become miss america? oh, i'm going to strive for
world peace. everybody loves world peace. she doesn't say how she's going to do it, no details but it's what everybody wants to hear. there's an old w.c. fields movie, you may not know who he is, where he has problems talking now and again and he's a bit of a snake oil salesman so much he has this product that cures hoarseness, you know? it cures hoarseness, but does it really cure hoarseness? snake oil says men. when i hear bad communication, whether it's by the federal reserve or current administration, with when the president looks you in the high that had no compromise to it with regard to compromise across the aisle, what i hear is we have a leader that is very popular but in the end i think it's important that bad communication is not an excuse for deceptive practices. because the end, deception is a horrible brick to put at the cornerstone of a foundation for
compromise. at our channel the big theme that i love is rise above, but how can we rise above when there's bad communication/deception? do you want to compromise with something that is not true? you know, in the end president lincoln i think had one of the greatest quotes that applicable to everything going on today, and it's quite simple. can you fool some of the people all of the time, you can confuse all of the people some of the time but you cannot fool all the people all the time because in the end i think that the biggest culpri culprits, the biggest culprits for what's going on and the news coming out is that the media is about three to four years late on many. whether it was my rant in february '09, we weren't wrong, we were early. think of lincoln's quote. the end when we were going through this government shutdown, everybody is so worried about who's going to get elected, who is not going to be
electable, my comment was that the 2014 mid terms are going to be about the affordable care act. i rest my case. back to you. >> i don't think anyone would disagree with you on that. at least not right now, rick. still to come, rick is going to talk to nobel prize winning eugene fama. and the ceo of norwegian cruise lines will speak to us. back in a few minutes. it's a growing trend in business: do more with less with less energy.
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shares of apple trading slightly lower after reporting earnings yesterday after the bell. on the conference call, apple's ceo tim cook suggested he does not have any immediate plans to placate activist investor carl icahn, saying the board won't announce any potential changes to its current stock buyback program until early next year. jeff sonfield is the senior associate dean at the yale school of management, a cnbc contributor, and sandra is from cantor. good morning. >> good morning. >> jeff, to begin with you. obviously, the question is how a ceo should handle someone like icahn. you think in apple's case it will be an increasingly irrelevant discussion. why? >> yeah, i think, you know, in this era of, you know, sharknado
triumphs, where we see the former shark, the takeover artists recast themselves as shareholder activists, icahn has done some good things, of course. he's had successes but a trail of failures. chesapeake was a great deal he took on, where you had an awful lot of entrenched self-dealing there. that's been great. the calls on netflix, very good on herbalife, but taken an awful lot of company into bankruptcy, x.o., blockbuster, america railcar, he was on the chairman of the board, plunged 90%, 95%, 100% -- >> he has no credibility? >> it's a mixed record. we have a trail of innovation. two new ipads. you know, we've got two imac books coming up. a good deal of innovation. we can see there's new stuff coming with the iwatch and the itv, and, plus, when this stock
is going to be soaring with the china mobile deal goes through, that will be 700 million, 800 million subscribersment china mobile has a big system that only apple can support with the two new phones. >> jeff, listen, what do you teach your students about this? you're immediately going to whether icahn is credible or not. surely, there is shareholder accountability. the mere fact that a number of shareholders say something -- i mean, do you have to make a judgment call? don't they run the company? or own the company? or do you say, actually, there's an asymmetry here. isco knows things i don't, because i can see my product pipeline. so with great respect for you, mr. icahn, i don't have to listen to you for that objective fact. >> he doesn't have a controlling entrance. he's a significant voice. but you do have regulation issues. you can tell him only what you tell everybody else. and this is a growth story here. he's got a lot to show for it.
so to siphon cash off on a short-term basis, and meanwhile, that $150 billion, two-thirds of it is overseas. you'd lose more than $30 billion in taxes to try to repatriate that the way he's talking about it. that'd be crazy. you look at a tech company like blackberry or nokia or motorola, and motorola company is another company he's destroyed, is these are places that you need a cash reserve, that's a volatile business. >> right. understand. let's give rose beth a chance here. >> first of all, i think cook is doing an exemplary job. he has made the transition from the jobs era without a lot of drama, no histrionics, steady as a leader. he has a stream of product enhancements. they are positioned, they keep moving. they keep moving. waiting, we shouldn't be waiting for the next blockbuster. it will come. meanwhile, they keep moving.
secondly, he's behaving inclusively. he is reaching out for talent in unusual places. it's very exciting that he has picked a terrific woman ceo, the head of burberry to run apple stores and online. that's showing something that silicon valley hasn't done well. >> but shouldn't he -- >> and she's terrific. she'll be a great addition, and she's not a crony. and he's team-oriented. >> yes. >> he seems to be subtly shifting the culture, so he wants people who play well with each other. he fired an executive who was good in performance, but didn't play well with other people. >> yes. >> at apple. he's constantly pictured, surrounded by some of apple's rising stars. this is a company that is positioning itself in its culture, its management, its leadership to continue to move. i'm very high on the future of a apple under tim cook. [ overlapping speakers ]
>> shouldn't a good manager develop a hedge in case icahn were to take this to the next level, were to stage a proxy fight, demand a board seat, something like that? >> you know, i think it would be crazy. i don't think he'd have the full support. i think his plan will collapse, as this stock will fairly soon cross 600. the analysts are conservative in the high 570s. i think rosa beth is absolutely right with the -- bringing in irhent, when they were build talent from within. a tremendous story here. >> well, we're very excited -- >> i'm going to interrupt you guys, because we do have paul ryan about to start his questioning of the medicare chief in front. the house, ways and means. thank you, guys. >> -- affordable employer health insurance in 2014. the reason that matter is it
determines whether the taxpayer is eligible for a taxpayer-funded subsidy or not. to mitigate this, dan wharfle told us, quote, we're going to help the individual at the front end, navigating through the exchanges, to understand whether they have an employer plan. let me ask you this. of the 700,000 applicants you've received, how many of them did you verify whether or not they've been offered or have employer ---en offered employ - employer-sponsored insurance? >> verification of the employer-sponsored insurance is part of the application process. if, in fact, that was available to them, they would not go on and complete the application. >> so it's just a self-attestation, is that what you're saying? you had no way of corroborating -- >> we actually ask additional questions. if you go online and go tru the application, it requests additional information, and we have ways of verifying whether or not employer-sponsored coverage was offered. so it's not just as simple as yes or no. if they don't have it, it's a
no. and so, we accept that. if it's a yes, then we try to work with them to see if it's -- if they're eligible for anything or not. >> okay. so i look at yesterday. you released a report that purportedly talked about premiums about young adults. the report says, these estimates do not take into account credits related to other essential coverage or tax-filing requirements. young adults on their parents' plans. let me ask you this. are you proactively finding out if individuals under the age of 26 are eligible -- who are eligible to stay on their parents's plan, are doing that or not, because they're not eligible for a subsidy, as well. >> right. so what we've seen is since the affordable care act, we have over 3 million young adults who are getting coverage through their parents' plans, which is pretty much the pool we anticipated. >> pmm mm. >> so when they go on the website, are you verifying whether or not their parents
have a plan that they're eligible for before determining whether they, themself, get a subsidy? >> it is part of the application process. i can get you more information on -- >> well, so, here's the point. look, two weeks ago in the c.r., we pass add law that president obama signed, quote, prior to making such credits and deductions available, the secretary shall certify to congress that the exchanges verify such eligible consistent with the requirements of the act. here's the question. are we really verifying at the front end whether a person's actually eligible for these subsidies or not? and here's why this matters. if they're not eligible for the subsidy and then once we reconcile these records, they get taxed the money back off of their refund. and so, this is what i mean when i say rude awakens. >> yeah -- >> so people are signing up for insurance, getting tax credit subsidies funded by taxpayers. the irs is already telling us they're confused about how to do this. you're not telling us whether or not you're proactively
determining whether, say, an under-26-year-old is actually eligible for the subsidies you're trying to sell them, and the problem is, once we learn whether or not they were eligible, and if they weren't, people in good faith will be signing up for subsidies that they're actually not eligible for. >> i think you're asking a different question, which is, are we doing 100% income verification - -- >> and subsequent eligibility verification. >> yes, part of the question, in the application process, are you dependent on your parents, are you dependent on your parents' tax plan? that is part of the question, it goes on, if so, we move them in that direction. but more importantly, part of what you're asking is the income verification, which is done on 100% of the cases. >> i'm not asking about income verification. >> okay. >> i'm asking about if a person signs up, were they offered credible employer insurance? because the employer mandate's been delayed, you don't have that verification tool. so you had to come up with a new
verification tool to determine their elle visibility for subs disses. if a person is offered insurance at their job, that meets your definition, they can't get obama care subsidies. >> that's correct. >> if a person is 25 years old, and they go on the website, and they say their income is x, and it's eligible for subsidy, they can get the subsidy. if they were eligible to be on their parents' plan, they're not allowed to get that subsidy. >> that's right. >> are you filtering that? >> yes. >> here's the problem. if you get this wrong, the way the law works is, you have to take that money back in their tax refund. tax refunds matter. people plan their lives around the refunds. they plan the spring breaks, the car payments, the bills. what people in this country don't yet know is if you get this wrong, what you've already acknowledged you're not doing it right, they're going to get their tax refund taken away from them, because they will have signed up for a subsidy which they weren't eligible for and didn't know. >> if you've been on the site, this is part of the clear instructions to folks, including
the under-age-26, including the fact that you're basically completing this action under penalty of perjury. very clear. help instructions on each site to explain the process, what is credible employer coverage, what happens if you're under 26. it is all available on the website. >> so if they get it wrong, they'll get taxed. >> all right. time is expire i'd. mr. lewis? >> thank you very much, mr. chairman. thank you, adam add men straighter for being here. thank you for all of your hard work. >> that was a lively exchange between paul ryan and the cms commissioner. bertha coombs is following the health care story. bertha, your reaction here. >> it's been very much a lively exchange, and that is one of the questions a lot of people do talk about. in fact, i was talking with a man whose policy had been cancelled this morning. he said, if i'm on the cusp of one of those eligibility requirements, if i make $1 more, all of a sudden, it gets clawed back. a lot of people are figuring
that out as they look through the regulations more carefully, as they're preparing to try to buy. a lot of the questioning this morning, not just on the technical issues that ryan was hammering on, whether they had the technical capability to really verify whether people had employer-sponsored plans, but, also, on the issue that is now the thing that people are really focusing in on, is the increased premium costs in the individual market, particularly for those who do not get subsidies. here's chairman camp questioning her about that earlier in the hearing. >> to the millions of americans who have attempted to use healthcare.gov to shop and enroll, i want to apologize to you that the website has not worked as well as it should. >> that was her actually initially in her statement issuing an apology, something that we didn't hear from any of the contractors last week. something we may very well hear again tomorrow from kathleen sebelius. but here is that interaction with chairman camp.
>> this man wrote me and said, my wife has been recently informed by her insurance carrier that her health care policy does not comply with the affordable care act, and now we must purchase the same coverage with an 18% increase. >> half of the people in the individual market prior to 2010 didn't stay on their policies. they were either kicked off for pre-existing condition. they saw their premiums go up 20% a year. some insurance companies have decided, and i think that's what you were referring to in your opening statement, they want to be offered new plans. if they want new plans, they have to come into requirements of the affordable care act. >> so the obama administration taking the line that the insurers are making the decision to offer new plans, not to continue to offer grandfathered plans to the insurers, they will tell you the industry association, ahip, says they're offering plans now that comply with aca. so those are the new plans they need to offer now. carl? >> still no -- still no
empirical numbers from her, bertha, on enrollment data. >> no, she was very much pressing -- camp was very much pressing that at the beginning, you're getting the numbers of people who are enrolled. can you give us anything about the demographics of the numbers? how many are young? how many of the 700,000 that you claim at this point have gotten through the application process are actually medicaid enrollment, not actually people who are buying plans? and she said that that information will not be available until mid-november. >> bertha, in the meantime, we know the deadline the obama administration has now said is apparently the end of november to get the site up and working. what are the practical implications, if any, from right now with these hearings? >> not so much in terms of that. the practical implications of having it up at the end of november, if they can have it working smoothly at the end of november, is that it causes a big crush. people who want to get their coverage starting on january 1st really need to enroll electronically by december 15th.
if you're not enrolling electronically to start on january 1st, you need to actually make sure all of the paperwork is done at least a month ahead of time. all of this is creating a practical time crunch to try to get some folks enrolled in big numbers. >> all right. bertha, i'm impressed by the viewers who are paying very close attention to the hearing. this is definitely on the top of everyone's mind. thanks to you, bertha coombs, covering the aca hearings in d.c. apple is under pressure to innovate despite posting the better than expected earnings last night. they posted good numbers on iphone sales and tim cook is hoping for, what he called, an ipad christmas. here's what cook had to say about the holiday season. >> in terms of supply, iphone 5s ended the quarter with a very significant backlog. however, our supplies building each week, in terms of the retina, or the ipad mini with
retina display will start shipping later in november. it's unclear whether we will have enough for the quarter or not. i think we'll do fairly well with ipad, as i had mentioned before. we felt like it was going to be a really great holiday season. >> eric is with all things d, and mitt is involved with rbc capital markets. good morning. >> good morning. >> the bears want to say we could be looking at our first holiday season with single-digit sales, the bulls say this deferred revenue is making the recent quarter look worse than it really was. what was your take from last night? >> yeah, absolutely. i think the one things the bears are pointing to is the gross margins not improving on a sequential basis, despite the incremental sales. that's a reflection that apple has made a conscious decision to give a lot of the software away for free, so that results in more deferrals, about a
$900 million impact, 160 basis points. as we go through december and march, 2014, we think not only do you get really revenue expiration from iphone 5s, and ipad christmas, as tim cook said, but margins, a big bear point, are going to structurally be heading higher, with 590, $600. >> yeah, we've seen a lot of price targets settle in the 600, 620 rake. eric, were you impressed by how the iphone moved? >> yeah, it seemed to move well. it's standard practice for apple to move the iphone into that fall quarter and always try to get a bit of a pop there, and then to set up the ipad for the holiday quarter. the question on the margins for me is really one about mix. we have the possibility of this shortage going into the -- into the tim cook kind of mentioned this on the call yesterday -- shortage on the mini ipad with the retina display, whether or
not they can deliver on time, whether or not they can deliver by a certain date, but also a question of mix. there's a lot of different ipad models, older models, newer models, that will hit profit issues. >> that's the issue people are focused on after the results last night. what does apple have to do to reassure people that this is a one-off than the start of a lasting trend? >> it's going to be a -- >> i mean -- sorry, go ahead. >> i was going to say (unintelligible) on the margin side was the f/x the way yen has moved. apple has to keep their head down, keep executing, keep putting out quarters the way they did. the important part will show up in the margins, when you get to march when revenues will probably be down 20%, 25%, our take is gross margins may be more stable than we've historically seen, and that will be the testament to the revenue. i think that will be a nice conviction point for the bears to look at eventually. >> eric, the frustrating thing
for a lot of observers of the stock is how many buy ratings are still centered around the unknown, right? the unknown television. the unknown iwatch, which we've sort of settled into this conventional wisdom that it's a 2014 story. what do you believe next year is going to bring? >> well, we've heard all sorts of different things about watches, tim cook has spoken at our conference two years in a row about having a strong interest in wearable technology at the all things d conference last summer and the summer before. so we know that that is in the water. and this tv thing just continues to exist in some apple lab somewhere. remember, the new products always come in january. they always have. so, you know, we'll just have to see what tim cook brings to the stage in january. >> yeah. awfully tough to get leaks out of them until the product is basically almost to the stores. eric, amid, thank you so much. >> thank you. >> thanks. now, shares of norwegian cruise lines, take a look at this, seeing a nice gain this morning, although we're starting to see them turn lower, i
believe, now. anyway, third quarter upside -- third quarter earnings beat estimates. the question is, should you "sail" into the company's stock for the rest of the year? we'll have more on that with the ceo of norwegian in just a moment. first, rick santelli will be talking to nobel prize winner eugene fama. rick, we'll be watching that one, for sure. >> i can't wait to talk to the professor, university of chicago, local. a free-market guy, like many u.c. professors are. i'm going to pose this question to him in ten minutes -- what happens when a free-market society becomes a subsidy society? what can go wrong? think fed? think interest rates. think being back here in ten minutes. i'm a careful investor. when you do what i do, you think about risk. i don't like the ups and downs of the market, but i can't just sit on my cash. i want to be prepared for the long haul. ishares minimum volatility etfs.
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other stocks in the sector moving higher, harris corp., micron, texas instrument,s, so keep an eye on the tech sector. carl. >> thank you very much. let's bring in simon hbos with a special guest. >> hey, carl. norwegian may be three of the smallest publicly traded cruise operator, but its outperformance has been dramatic. lclh is up almost 70% since the stock soared and the nasdaq ipo in january. that, of course, is in stark contrast to rivals royal caribbean and the much troubled carnival. straight off his third quarter earnings call, ceo carl sheehan joins us live from the miami headquarters of norwegian cruise lines. welcome back to the network, sir. nice to see you again. >> hey, simon. glad to be here. >> the big news, obviously, this summer for you was that you had the breakaway. six months since you and i stood on board the "breakaway," you introduced it, the largest to homeport in new york. has it delivered to you in terms
of pricing and occupancy? >> yeah, actually, we just finished the third quarter, as you know, and reporting the results today. and the "breakaway" exceeded expectations on pricing, on-board experience, guest satisfaction, travel agent advocacy, and on and on. it's just been a fantastic addition to our fleet. >> you know, and we should mention, of course, how large it is with the 4,000 berths. you choose to in your earnings statement by saying the environment this year has become more challenging than we anticipated. is that about what's happening with pricing, that very aggressive promotional activity from carnival, particularly in the caribbean -- because if i look at what you've reported here from the higher end, and that's the position you have in the market, your occupancy is improving, up 130 basis points. but your pricing is only up 2.5%. >> yeah, so the environment is -- you know, it's always
something else in this industry, whether it's a hurricane or the economic downturn or something going on in europe, or mexico. we're always working hard to overcome whatever that obstacle is. and i would say this is no different. we're very excited about our prospects. the environment continues to be, you know, an okay one for us to continue to thrive. we see solid pricing for the fourth quarter. we see solid pricing for next year. we are -- we just finished our call with the investors and our -- >> sure. >> -- and are expecting significant earnings in 2014. >> the next big event is the launch of the "4000 getaway" based in miami. you haven't said anything about 2014 till the earnings call. what are you now saying about earnings? >> sure. you know, normally, i would have said it's a little premature to be talking too much about 2014.
we're in a reasonably good book position, consistent with prior years the first quarter is a little bit different, because we're pushing on pricing in the first quarter. so we're gauging that on a daily basis. but having said all of that, when i look at 2014 from an overall standpoint, we expect to grow from our midpoint of our guidance for 2013 by over 60% in 2014, and i think that's quite spectacular, and it's just another indication of our journey from good to great with our brand, and the consistent measured orderly growth we've had as a company with 21 consecutive quarters of earnings growth. >> kevin, before we let you go, much of the country is consumed by this debate over obama care. you're a very successful businessperson, the subject of "undercover boss" and cbs, telemundo, took avis to market, as well as norwegian. what is your feeling as a businessman about where we are now with obama care and how you're having to deal with it?
>> yeah, for us, it's a little bit different. we provide solid medical benefits for all of our shoreside employees, and on the ships, it's a different program where we have doctors on each of our ships. so we don't have the same impact. but i do, you know, feel that there's a lot going on from a government standpoint. you know, i tend to sway more towards let the environment and let the economy work on its own and not have undue influence over it. >> mr. sheehan, it's good to see you again. thank you for sparing the time. kevin sheehan joining us from norwegian in miami. guys, back to you. >> all right. thank you very much, simon. a great interview. while you've been talking, we have gotten word from dell, out of round rock, texas, the go-private transaction has been completed. if you recall, silverlake and michael dell, the chairman, founder, ceo, taking the global technology firm private.
1388. that's 13.75 in cash, plus the 13-cent special cash dividend. if you missed the 10-qs and the 10-ks, we won't see them for quite sometime. >> we will see transocean, i believe that's who replaced them as of yesterday in the s&p 500. so dell leaves transocean joins, and a lot of people are shaking their heads about how it all went down. >> yes. meantime, the next guest has been called the king of predictable markets. he won a nobel prize in economics. what does eugene fama feel about the economy and u.s. fed policy. coming right back.
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his university of chicago students, good to have you here, and happy to take the time to spend time with us, professor. >> thank you. my pleasure. >> listen, as a noted economist, as you look at the qe programs as we embark on a fed meeting, can you tell me your associations about the current program and what you see as potential issues when we get to a point when we have to reverse the interest rate subsidies now imbedded in our markets? >> sure. actually, i've been doing research on that very question for the last six months. i think that what they are doing is -- the effects of it are greatly inflated by the accou s accounts. so what has the fed been doing? well, in 2008, they changed the game they were playing and they started paying interest on reserves. and they're paying interest on reserves currently, slightly above market rates. now, what that means is reserves
are now basically just short-term debt. so what they've been doing is issuing a lot of short-term debt, $85 billion a month, and using it to buy back long-term debt. with the goal of lowering the interest rate on long-term debt. now, they take credit for the low interest rates on short-term debt, but, in fact, what they've been doing should have raised the interest rate on short-term debt, not lower it. because you can't do both. if you're issuing interest-bearing securities to buy other interest-bearing securities, you're pushing up one rate and pushing down the other rate. what happened? actually, the short rate fell during that whole period. >> well, when i -- you know, professor, when i talk to people that are buying cars, when i talk to financing -- financing homes, and, of course, we saw the run-up that started in may in interest rates, all of that was called in to question. i guess a simple question at this point would be -- what
we've seen in terms of interest rate volatility, and then the fed pulling back on tapering, is janet yellen going to ever find the right time, sir? you know, i know your market-efficient work has many issues with it, like the national exuberance. are we going to have an irrational interest rate market dur to the inputs of the fed? >> no. because i think they are basically neutral events. i don't think they do very much. they just -- >> so when the balance sheet reaches $4 trillion, professor, i guess my question is, in the economy down the road, both globally and domestically starts to pick up, if they want to start to control the velocity, wouldn't it be the normal course of action that they would sell securities to pull some of that capital back in? isn't that normal operating procedure for a central bank? >> sure. sure, but -- >> what happens when you have 4 trillion of those securities that you start putting back out
there to take the money, isn't that going to poison the well in terms of interest rates moving up dramatically? >> okay. can i answer? >> yeah. >> okay. they have 4 trillion on one side of the balance sheet, they have 4 trillion on the other. all they'll do is get rid of one side, retire the reserves, and that will lower the balance of securities that they -- that they hold. it's basically a neutral event. it maybe has a little effect on the shape of the term structure, but it's no big deal. it's not like it was in the old days when you -- >> so, professor, professor, let me interrupt you again. if it's no big deal, then why don't all central banks just do this to the nth degree, and make it a constant, day-to-day, week-to-week issue, purchase what they issue, and keep interest rates low forever. why don't we embark that on a neo central banking policy. >> there's so much confusion in
what you said, it's difficult to answer. they haven't been lowering the short rate, they've been putting upward pressure, and going down despite them. they don't have much effect on the rates. that's my whole point. and what they're doing now, in just issuing short debt to buy long debt, that's a -- kind of a nothing activity. it's hyped up a lot, but i don't think it really has any real effect. >> well, listen, professor, we're out of time. i really thank you for doing the show today. it's been a pleasure. but it also reminds me, i think, in some regard why economics is a bit of a dismal science. i would like to -- >> -- and i hope we have more time to explore the issue again over the next weeks and months to come. thank you very much, sir. thanks to eugene fama. coming up, what the heck is google doing on a barge in the
san francisco bay? no one's really sure, so we sent our own josh lipton to san francisco to find out. josh? >> yeah, we are here in san francisco bay trying to answer a big mystery. what in the world is this huge hulking floating structure? silicon valley is buzzing with speculation. we're going to try to get to the bottom of it when "squawk on the street" returns. ♪ ♪ here we are, me and you
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it has been one year since sup sup superstorm sandy devastated the east coast. are we better prepared today? scott cohn is live in new york with that story, and, scott, for a lot of our viewers, at least, it was the live shot in manhattan when we realized how bad it was going to be. >> reporter: yeah, we certainly are drier today than we were a year ago. it was on this program, remember the scene. this is battery park. it's high and dry now. but take a look at what it was like a year ago today. you remember i was sloshing around in water that was above my ankles. and the worst of the storm was still several hours away. when the storm surge hit that evening, we barely made it out of here. you remember, of course, the aftermath. the flooded subways and tunnels, basically everything below 34th street, south of the empire state building, without power for days. the total cost in just new york city, $19 billion.
the new york stock exchange did not flood, but it did close for two days, first time that happened due to weather since 1888. afterward, mayor michael bloomberg said, something's gotta change. >> we can do nothing and expose ourselves to an increasing frequency of sandy-like storms that do more and more damage. or we could abandon the waterfront. or we can make the investments necessary to build a stronger, more resilient new york. investments that will pay for themselves many times over in the years to come. >> reporter: well, that hasn't happened. one year later, the idea of flood protection for lower manhattan has basically gone nowhere. the mta says it will take years to completely repair the subways. [ horn sounds ] as you can hear, the staten island ferry is still running. there have been changing at edison. remember the explosion? they've made a lot of
improvements, including three layers of massive floodwalls. >> i think sandy was the wake-up call. it's the reality that we're at the mercy of mother nature. [ horn sounds ] >> reporter: the nyse has updated its business continuity plan. so has fenra, self-regulatory organization, the idea of more electronic trading if wall street is inaccessible, and they said they tested the program last month, and it worked the way it was supposed to. we'll see what happens. carl? >> exactly. encouraging for now, scott, but a lot still remains to be tested. thank you so much. scott cohn downtown for us this morning. now, let's bring in bob pisani with a look at what's moving at the new york stock exchange. you were reminiscing about hurricane sandy. >> it's not about electronic trading. the entire electrical grid was down. we could have had all of the electronic trading we wanted, and we couldn't have had it because there was no electricity. the eeriness was, i was here at the nyse, blackness.
they said it's like the revolutionary war here. they didn't have electricity here. no, no, they had gas lights in the revolution. they had ill illumination light. this was blackness below 30th street. the eeriest, strangest feeling days on end. i hope we don't see that. today, it's about the great rotation. the s&p is up again. everybody is weary. how does the market keep advancing? because of the rotation. telecom underperforming for a long time. now it's stepping up, relatively small part of the market. consumer staples have underrepresented in terms of the market advance in the last few weeks. it's been growth stocks. in the last few days, they've been advancing. the consumer staples. they've been monsters in the last few days, colgate, clorox, going up every single day. the great . something falls back like tech and something takes its place. that's why the s&p every day is up 2, 3, 4 points. tech stocks, speaking of tech, yes, apple is up. apple suppliers are up. good reports -- sorry, apple is down. the suppliers are generally to the upside.
look below the surface. i don't like the warnings in the electronics comes. pmc sierra, they do storage systems. sam mina, they're down. they guided lower, down 14%. what this means is that it's very tough out there in tech land. very lumpy. and the guidance is very tough overall. industrials are another story. by and large, like johnson controls, had a good report. massco here in the u.s., excellent report overall. air products sells gas around the world. the product's pretty good. basically, the growth there is flat. so i'm more impressed with the industrials today and how they're holding up on the glo globe -- global system, than i am in some of the electronics. really, really lumpy. the guidance is very, very hard to figure out right now. >> sure. >> all right. thanks, bob. bob pisani. meantime, the mystery surrounding a large barge that's docked in san francisco bay is growing by the minute. is it a google data center?
maybe a floating google glass store? nobody seems to know the answer. the barge appears to be connected to google in some way or another. our own josh lipton went live to the san francisco bay to find some answers. good morning to you, josh. >> reporter: good morning, carl. yeah, we are here near treasure island in the san francisco bay, and we're trying to answer this big mustry of what exactly is this massive four-story floating structure? now, the speculation is, what you're looking at is a data center, a floating data center built by google. now, we did call google looking for some answers. they gave us a no comment. i then talked to some data center expert, they were so spooked by google, they wouldn't go on the record, but on background, they said, listen, it could actually work as a floating data center. i asked them what the benefits of that would be. why would you want that? they said, listen, for a floating data center, it would be mobile. you could use the water to cool it. in fact, some data centers already use that technology.
they said. also, it might make sense in terms of a natural disaster, you would want a fully functional self-contained data center. if all of this sounds kind of wild and farfetched, it's worth remembering that a few years ago, google patented this very same technology. they had a patent for a water-based data center that has seawater cooling units, and one more clue, guys, i'd give you -- we have reports that a yacht that does look like a lot like larry page's boat was docked at the same pier. soor now, the mystery continues. guys, back to you. >> it does. and, josh lipton, we love you have braved the waters there to try to get close to it for us this morning. if you find out, i should say, let us know. josh lipton, somewhere in the san francisco bay? >> yes. what a great by line. and rent's cheaper out there, right, hey, for the barge. but no landlord. >> yet. >> unbelievable story. nice job.
if you pay close attention to the lock debate over obama care in 2010, this probably sounds familiar. >> if you like your current p n plan, you will be able to keep it. let me repeat that. if you like your plan, you'll be able to keep it. >> infamous words, according to new reports by nbc news, what the president said then isn't exactly correct, and he may have known all along. what does it mean for the white house and the future of obama care? we'll get more on that with white house insider and former head of the council of economic advisors laura tyson, who joins us in just a moment. americans take care of business. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one. to help you retire your way... with confidence. that's what ameriprise financial does.
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talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum - bum♪ >>. >> coming up on of "the half," have the aftermath of the apple report. forget the momentum names. gemma is back, digging up the momentum sector you haven't considered. even though u.s. stocks are hitting record highs today, former goldman sachs asset management chairman jim o'neill sees much more opportunity elsewhere. he'll tell you exactly where coming up on "the half." carl? >> see you in a few minute, scott. thanks. if you remember before the affordable health care act became president obama assured people if they liked their health insurance, they would be able to keep it. according to nbc news, people are already getting cancellation notices for their health plans, and the administration knew it was going to happen. bertha coombs has much more on that story today.
good morning. >> good morning, carl. yeah, that's right. the issue is for a lot of the plans, they don't have the essential health benefits. ten essential health benefits which include things like pediatric care, maternity services, mental health services and prescription drug benefits that a lot of plans -- a lot of folks doesn't want in their plans, especially if they don't need them. so now, because they're requi d required, a lot of plans that people used to have, particularly in the individual market, that they this tailored to their needs are no longer compliant with the aca. so a lot of insurers are saying we can't offer you that plan anymore. now we have to offer you the new plan, and oftentimes, because of the new benefit, the plans have higher premiums. interestingly enough, during the hearing this morning, house, ways, and means, now 100 minutes into that hearing, initially the thought was they would focus in on the technical problems with the healthcare.gov that have been in the headlines. but a lot of the questioning today is about this very issue
with regard to the premiums. nonetheless, they are also continuing to hammer away at cms administrator marilyn tanover about what she knew with regard to the issues on the website and whether she asked about delays. subcommittee member devin nunez actually asked her whether she ever raised a red flag that maybe some of these things should have been delayed. >> i did not ever argue that we should delay the exchanges. what i did present to the secretary in september is that there were certain functions that we should delay beyond october 1, and i think those have been very much in the press, that had to do with the automation of shop, it had to do with the spanish language website. >> and she even got heat from a democrat from texas, who wants to know why the spanish website
still isn't up. hearings still going on. we'll bring you more as it becomes available. kelly? >> sure, bertha. it seems to spur more questions than answers. bertha coombs following this for all of us. we want to get more from laura tyson, former chairman of the president's economic advisors under clinton, a member of president obama's economic recovery advisory board, and she joins us now from the buttonwood gathering in new york. laura, good morning. thank you for joining us. >> good morning. good morning, thank you very much for having me. >> and we want to ask you right away about the affordable care act, because earlier, john boehner said it was a wet blanket over the u.s. economy. certainly more and more of the economists we're talking to says it will end up sucking more dollars out of the american pockets that might have been spent elsewhere, and the economics of the plan itself may not make sense if people feel as though they can't or are unwilling or unable to sign up. where do we go from here? >> so the affordable care act is a major foundation for getting long-term growth of health care
costs down. in fact, in the buildup to the affordable care act, and still today, you can see that health care costs, the rate of growth, has been slowing. this is a long-term issue. the major debt and deficit problem we have 25 years from now is essentially health care spending problem and a revenue problem. so we've got to get this right. this is an investment in dealing with all of our economic problems going forward. >> well, right. and it's that importance that makes the current problems all the more troubling. >> it's -- no. >> i understand you're not in the white house now, but it does mean there has to be a serious effort to make sure this isn't -- that this whole thing doesn't fail before it's even launched. >> i agree, and i think that the president and his team has committed to addressing the issues of the exchanges and the software issues that arose with that. i think that the issue of costs is an issue of getting everyone
into the system. remember, half of the people who are going to go on to the individual exchanges will be subsidized. the whole empirical and theoretical foundation for this reform is you put everyone into the system, and that will ensure everyone and bring the costs down. and by the way, there is no evidence the council of economic advisory, has done a very good report on this, i would recommend to people, there is no evidence at all that employment has been affected by any of the rollout of the aca. absolutely none. there is no negative effect on employment and firms 30 or under -- 30 people or under. it's just not supported by the data. >> laura, i know your expertise is more in the policy as opposed to the messaging itself. how do you defend the president coming out and saying so often, if you like your plan, you can keep it? >> you know, i wasn't there. it's very hard for me to answer this question, other than to say
that, look, i get employment, i get insurance through my employer. my employer every year makes adjustments in the plans that they offer, and i have to look at the plans and decide which one to buy. and this year, there are changes in the plans. a lot of what's happening here is that people whose plans were short-term plans, a year plan, they want to renew, and it turns out what the insurance companies are offering now is different than what they had before. so that is, you know, to some extent, this is churn in the insurance market. it is the case that the new system requires that insurance plans -- those that will be subsidized in the private market -- cover certain things. i think you said there was a 10-point list of things that need to be covered. of course, that means the products the insurers offer are going to change. as i said, it is normal for -- >> right, but laura -- >> -- packages people have to change. >> -- precisely because it's normal is why the obama
administration either knew or understood the normal churn would mean most people would lose their coverage. >> first of all, most people losing their coverage is simply not correct. what you just state sd not being reported. it's being reported, and i haven't read the report or the analysis, that some people cannot get the insurance product they had before because under the new standards of what is available, those products did not meet the standard. that's saying actually the product that's available is probably a better product, and there's a lot of subsidy which wasn't available before. i don't flow about the messages, i don't know about the messaging behind the policy. i think it's really not correct to say that most people are losing their coverage? no. most people are gaining coverage who didn't have it before. >> let me apologize. i did not mean to say most people losing their coverage. if it's normal churn in the policies to change year after year, that the administration would have to know that that
normal churn would mean that a lot of the policies wouldn't be grandfathered in under the new act? >> i really cannot comment on that. i was not in the room. i don't know who knew what, honestly. >> no, look, i appreciate that. i know that wasn't the case. but certainly, you can understand this morning a lot of people just trying to make heads and tails of it basically. we hope to have you back, ms. tyson. we didn't even get into the fed. there's so much more we could discuss. thank you so much for joining us, laura tyson, from the gathering in new york. >> a good interview, and an important topic, as viewers have told us. in the meantime, a lot of big companies making moves on oerping ining -- earnings. the earnings squad is here to tell you everything you need to know when we come back. is investments.ny mello managing them, moving them, making them work. we oversee 20% of the world's financial assets.
welcome to the earnings squad where we dissect the earnings stories every one is talking about. joining me is dominic chu and tha doctor, john najarian. we have a lot of companies to get through. no herb greenberg here. [ laughter ] we still want to talk, jon, herbalife, because it was a big quarter for the company. >> yeah, revenue growth is outstanding. 2.5 million distributors. it seems ackman may be wrong about this one as he was about jcpenney. and you look at the potential,
as they said, during their car, that they could do sharebuy backs after the audit is over. that bodes well for them, that's why the stock is up big. >> and a former surgeon on the board now. >> on the board, right. >> credibility. >> allays some concerns about the efficacy of their products. >> yeah. >> also, the 19th-straight quarter of them beating estimates. >> pretty good streak. >> wrong side of the trade, mr. ackman. wrong side of the trade. shares of goodyear tiring trading lower, it was a beat and raise. the company did miss on revenues. so that could be the reason behind this sharp pullback in the shares. keep in mind this is a stock that's really outperformed the auto sector more broadly. it's been a monster performer. it's up 84% over the 12 months, past 12 months, and outperformed ford, gm, toyota, honda. the slight revenue miss, it could be one major reason why the stock is taking a breather in today's session. >> that, and cummins. >> yeah. >> because the suppliers, it seems, are under pressure here,
melissa. and i think you could buy them another day, though. >> all right. let's touch on the shares of the nutri/system, watching them trade higher after better-than-expected earnings, dom. >> this is about herbalife, their products, nutri/system, diet products. they're going into this upcoming season. it's critical, right? as you approach the new year, it's about resolutions, diet, all of that stuff. they're approaching it with cautious optimism. the turnaround trade may be taking hold. >> right. that's it for "earnings squad." back on "street signs" and the earnings preview. coming up next on "squawk on the street," shares of tesla getting hit today. find out why. that's next. ♪ [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading.
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welcome back. we want to just check in with shares of tesla. they're down about 3% at the moment, though they've been down a little more than that during the session. of course, a tough week for them. at the session lows, carl, i believe they were pretty much down in a bear market from their peaks. there are a couple of different things going on here. they've been hit by reports of another model s catching fire, this time in mexico, after crashing through a concrete wall and hitting a tree. there's focus again on whether it's just momentum coming out of some of the high-flying names we've seen, with tesla up fivefold this year, you do want
to give some context. >> a few days since musk said the multiple's more than the right they deserve. this is the third consecutive loss for tesla. it has broken 1 60, breaking the 21-simple averages. >> it could tell us more about the session. yeah. back to headquarters and scott wapner and "halftime report." >> thanks so much. here's what we're following today. the apple aftermath. numbers are in. stocks are on the move. star analyst tony saccanogi tells us where it can go from here. tesla may grab the headlines, but gemma says the best mo-mo trade is somewhere else. she'll explain. the top story, is the market on the pace for the biggest monthly gain since october 2011? new all-time highs today for the s&p, the russell, the transports. we're talking about where the opportunity is in today's market. is it in the united states? is it elsewhere? it's "halftime report," let's